Don't Mess with Texas, US EPA!

Don’t Mess with Texas! That was the bottom line in a 23-page opinion by Circuit Judge E. Grady Jolly who headed a three judge panel from the Fifth US Circuit Court of Appeals based in New Orleans reviewing the appeal by the State of Texas of the US EPA action denying approval of a state requested Flexible Permit Program under the Clean Air Act. The court said US EPA’s action was “arbitrary and capricious” and that its delay in deciding the matter was unreasonable.

The Appeals Court remanded the matter back to the EPA essentially forcing the agency to approve the plan or give the court a substantially better justification for denial. The Appeals Court opinion is a woodshedding for US EPA:

“Sixteen years tardy, the Environmental Protection Agency (EPA) disapproved a revision to Texas’s plan for implementing the requirements of the Clean Air Act. The untimely disapproval unraveled approximately 140 permits issued by Texas under the revision’s terms, and now requires regulated entities to qualify for pre-revision permits or risk federal sanctions.”

It didn’t get better for US EPA after that either.

“We hold that the EPA’s disapproval of Texas’s plan fails Administrative Procedure Act review. Although the EPA acknowledges the distinct role of the states, which is Congressionally called for in the design and enforcement of State Implementation Plans, the EPA based its disapproval on demands for language and program features of the EPA’s choosing, without basis in the Clean Air Act or its implementing regulations. For the foregoing reasons, we GRANT the petition for review, VACATE the EPA’s disapproval of Texas’s plan, and REMAND.”

This case dates back to 1994 when Governor Ann Richards submitted the Texas Flexible Permit Plan to US EPA for approval. EPA filed the request until a group of industrial parties sued more than ten years later demanding that EPA decide the matter. The suit was settled with an agreement that EPA would issue a decision.

Judge Jolly’s opinion goes on:

“The EPA proposed disapproving the Program in 2009 and issued final disapproval of the Program on July 15, 2010. Proposed Rule; Flexible Permits, 74 Fed. Reg. 48,480 (proposed Sept. 23, 2009) (to be codified at 40 C.F.R. pt. 52); Final Rule; Flexible Permits, 75 Fed. Reg. 41,312 (July 15, 2010) (to be codified at 40 C.F.R. pt. 52). As a result of the EPA’s disapproval every facility with a flexible permit could face fines or other enforcement action irrespective of emissions levels. The petitioners now challenge the EPA’s ruling and seek to set it aside.”

That’s where the Judge threw the line on EPA discretion:

“We begin with the EPA’s primary ground for disapproving the Flexible Permit Program: The Program might allow major sources to evade Major NSR. The EPA found that the Flexible Permit Program “has no express regulatory prohibition clearly limiting its use to Minor NSR and has no regulatory provision clearly prohibiting the use of this submitted Program from circumventing the Major NSR SIP requirements.” 75 Fed. Reg. at 41,313.

The EPA’s concern is that the Flexible Permit Program, which Texas has represented as a form of Minor NSR, might make it possible for major sources to evade Major NSR. Id.

“This danger exists, the EPA argues, because of the absence of an express statement that the Program does not apply to major source construction or modification.”

“Although the EPA’s concern over the potential for Major NSR evasion involves the Agency’s interpretation of a law, it does not involve the interpretation of a federal law. Before approval by the EPA, a SIP revision is state law for which the EPA’s interpretation is not authoritative. Luminant Generation Co., LLC v. EPA, 2012 WL 3065315, at *14 (5th Cir. July 30, 2012) (citing American Cyanamid, 810 F.2d at 493). We need not, therefore, accept that Major NSR evasion is probable based solely on deference to the EPA’s interpretation of the Texas law that forms the basis of this petition. “

“Furthermore, the EPA did not make findings demonstrating that the Flexible Permit Program “would interfere with any applicable requirement concerning attainment” of NAAQS “or any other applicable requirement” of the CAA. Although we do not here decide whether the EPA must make findings before concluding that a SIP revision would interfere with the requirements of the CAA, the lack of findings moots any suggestion that we must defer to the EPA’s technical expertise. The EPA did not rely on its technical expertise in rejecting the Flexible Permit Program, and we cannot either. Thus, our interpretation of the Texas law that forms the basis of this petition is not influenced by deference to either the EPA’s interpretive or fact finding ability. We do not decide whether the EPA must make fact findings demonstrating interference with the CAA because it is unnecessary in this case: The EPA has failed not only to put forth evidence demonstrating interference, but also to put forth a cogent theory on how Texas’s manner of drafting would result in interference. The standard for disapproving a SIP revision—that the revision would interfere with the CAA—surely requires more than the EPA’s bare conclusion.”

“The Flexible Permit Program does not allow Major NSR evasion because it affirmatively requires compliance with Major NSR. The operative language, found in 30 Tex. Admin. Code § 116.711(8)-(9) (2010), states with respect to Major NSR. . . .”

This will probably not be the last time bureaucrats are challenged for substituting their administrative discretion when the plain language of the law does not fit a policy objectives. But the courts are beginning to take notice especially when the consequences of such actions are as material as they are in this Texas case. Good facts make for good case law and this time Texas had them on its side.